The Open Cybernetics & Systemics Journal

2015, 9 : 2718-2723
Published online 2015 October 29. DOI: 10.2174/1874110X01509012718
Publisher ID: TOCSJ-9-2718

Empirical Study on Pricing of Structured Products with Martingale Theory

Chen Si-liang , Peng Long and Zeng Jian-qiu
Beijing University of Posts and Telecommunications, P.O. Box 178, China.

ABSTRACT

This paper focuses on the pricing of CSI 300 index-linked structured products with barrier option attached to call option. “Huiying No.198 of Huaxia Bank” was characterized by one index linked & multiple observations, and priced by means of the martingale theory. The pricing formula of barrier option attached to call option was simplified by Girsano conversion of P and R measures. The option price was calculated through conversion application of Girsanov Lemmas. The result demonstrates that the theoretical premium rate of Huiying No.198 is 􀀁􀀁􀀁􀀁􀀁􀀁􀀃􀀂 martingale theory provides a concise and straightforward method.

Keywords:

Barrier option, girsanov theorem, martingale theory, pricing, structured products.